If Sales Amounted to $300,000, Variable Costs Are 60% of Sales

question 65

Multiple Choice

If sales amounted to $300,000, variable costs are 60% of sales, and operating income is $40,000, what is the operating leverage?

• A) 3.000
• B) 7.500
• C) 1.875
• D) 4.500

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Definitions:

Shut Down

A temporary closure of a business or operation.

Marginal Cost

The expenditure required to produce one more unit of a product or service.

Quantity Supplied

The amount of a good or service that producers are willing and able to sell at a particular price over a given period of time.

Marginal Revenue

The extra revenue gained by the sale of an additional unit of a product or service.